Accountants Day Rate Formula
Learn how a monthly income target, costs, tax, pension and billable days produce an estimated accountant day rate.
This calculation works backwards from the income you want to retain, then adds monthly business costs and spreads the revenue target across realistic billable days.
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Recommended day rate
Where:
First find the profit needed before estimated tax and pension, add costs, then divide by the days you expect to invoice.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| desiredMonthlyTakeHome - Desired monthly take-home income | Personal income target after estimated tax and pension. | currency |
| effectiveTaxRate - Effective tax rate | Estimated percentage of profit used for tax. | percent |
| pensionRate - Pension contribution rate | Planned percentage of profit contributed to pension or long-term savings. | percent |
| monthlyBusinessCosts - Monthly business costs | Regular monthly operating costs. | currency |
| billableDaysPerMonth - Billable days per month | Days expected to be invoiced to clients. | days |
Step-by-Step Calculation
Calculate the retention rate
This is the share of profit assumed to remain after tax and pension.
retentionRate = 1 - ((effectiveTaxRate + pensionRate) / 100)
Find required profit
This reverses the estimated deductions.
monthlyProfitBeforeTax = desiredMonthlyTakeHome / retentionRate
Add costs
Revenue must cover both required profit and operating costs.
monthlyRevenueRequired = monthlyProfitBeforeTax + monthlyBusinessCosts
Calculate the day rate
The revenue target is divided across invoiceable days.
recommendedDayRate = monthlyRevenueRequired / billableDaysPerMonth
Freelance accountant monthly target
Retention rate
1 - ((25 + 5) / 100)
70%
Required profit
4000 / 0.70
£5,714.29
Required revenue
5714.29 + 1000
£6,714.29
Day rate
6714.29 / 16
£419.64
Final Result
Estimated required rate: about £420 per billable day.
Assumptions
- ✓Tax and pension percentages are simplified estimates of profit deductions.
- ✓Business costs recur monthly.
- ✓The stated number of billable days is achieved.
- ✓Figures exclude VAT.
Limitations
- !Actual tax depends on business structure and circumstances.
- !One-off expenses, late payments and unpaid leave are not included.
- !The result is a planning estimate, not financial or tax advice.
Common Mistakes to Avoid
Using all working days rather than invoiceable days.
Leaving out insurance, software, marketing or professional fees.
Treating VAT charged to clients as income.
Using a marginal tax rate instead of an estimated effective rate.
Related Formulas
Frequently Asked Questions
How do I calculate an accountant day rate from a monthly income target?
Estimate pre-deduction profit, add monthly costs, and divide the revenue target by billable days.
Why do fewer billable days increase the rate?
The same monthly revenue must be earned across fewer invoiced days.
Should VAT be included?
This calculation excludes VAT; where applicable it is generally added separately to invoices.
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